King v. Burwell Isn’t About Obamacare

K ing v. Burwell—the challenge to the Affordable Care Act that the Supreme Court will hear on March 4th—is about more than health care. Court watchers have finally begun to realize that the case is also all about states’ rights. And while the challengers have tried to submerge this issue—because it dramatically undermines their case—its centrality to King has become undeniable.

The issue in King is whether the ACA penalizes states that opt out of setting up their own health insurance exchanges and, instead, let the federal government do it for them. The challengers have seized on four words in this 2,000-page law that, they contend, contain a dramatic consequence for the 34 states that have made this choice and allowed the federal government to step in: the loss of critical insurance subsidies that make health insurance affordable and sustain the insurance markets under the law. Without the subsidies—which are estimated at $25 billion across the 34 states—more than eight million Americans will likely lose their insurance. And, as a result, the insurance markets in those states will face near-certain collapse. The government argues that the statute contains no such penalty.

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The challengers maintain that the case is simply about reading plain language. (I have detailed elsewhere why their hyper-literal reading of four words out of context is anything but plain and is not how the Supreme Court usually reads statutes.) But King is about a lot more than this. The case is about federalism—the role of states in our national democracy. The reason the challengers don’t want anyone to realize that is because the very text-oriented justices to whom they are appealing are the exact same justices who have consistently interpreted federal laws to protect states’ rights. And the challengers would read the ACA in the opposite way—as having devastating implications for the states.

The challengers’ interpretation turns Congress’s entire philosophy of states’ rights in the ACA upside down. Congress designed the exchanges to be state-deferential—to give the states a choice. But under the state-penalizing reading that challengers urge, the ACA—a statute that uses the phrase “state flexibility” five times—would be the most draconian modern statute ever enacted by the U.S. Congress that included a role for the states. What’s more, if interpreted as the challengers hope, the ACA would have been debated, enacted and implemented for two whole years under intense public scrutiny, including the scrutiny trained on it during the last major constitutional challenge in the Supreme Court in 2012, without anyone—no state, congressman or blogger—noticing these consequences or objecting to them.

A brief filed by Virginia and more than 20 other states attests that any clue of the dramatic penalty the challengers have read into the statute was entirely lacking. In the end, King is about whether an invented narrative that only emerged for purposes of this case should be permitted to work the greatest bait and switch on state governments in history.

Yes, protection of states’ rights is most often associated with the conservative movement. But it shouldn’t matter that the Court’s federalism rules support the government this time around. If these states’ rights rules are real and objective rules of law, they should apply regardless of whose side they happen to serve.

The Supreme Court, led by its conservatives, has spent the past four decades developing a set of legal rules to protect states from federal imposition. Those rules require Congress to provide unmistakably clear notice in the text of a statute before the Court will read a statute to intrude on the states. As read by the challengers, the ACA would completely violate these Court doctrines.

In fact, these very same state-protective rules were used by those who challenged the ACA in 2012—as well as by seven Justices in that case when they concluded the ACA’s Medicaid expansion was impermissibly coercive on the states. It is thus remarkable that the King challengers—formerly staunch federalists—have suddenly adopted an interpretation of the law diametrically at odds with these protections. They do not mention these flagship cases in their briefs, even though the consequences that their reading would impose on the states are far more intrusive—and come with no explicit warning in the statute—than those at issue in Medicaid expansion.

The problem again is hyper-simplification and obfuscation. Just as the challengers urge an over-simplistic reading of the statutory text, they have dramatically oversimplified how Congress approaches the states in the statute, masking the state-deferential way in which the ACA actually addresses the insurance exchanges. They argue that Congress is interested only in bullying the states when it comes to enlisting their cooperation and that the whole ACA adopts the same structure as the Medicaid expansion, which was a “use it or lose it” grant to the states. Not only would such a characterization of how Congress legislates with respect to the states be destructive to federalism in the long run (not to mention raise potential constitutional problems), it is simply wrong.

Long before King, the Court and scholars alike had recognized that Congress has a deep toolbox of varied statutory structures that it uses when it writes statutes with state roles. There are two primary models. One is the Medicaid model, a grant to the states that the states may accept or decline. If the states decline the money, that’s it, they simply lose the funds. As the amicus brief I co-authored in this case details, all of the programs using this model operate in the same way, and provide explicit notice to states of the consequences of declining the federal grant. What’s more, the fact that Congress was so explicit in the ACA itself about the consequences to the states of rejecting the Medicaid expansion shows us that Congress knew how to be clear in that statute about consequences to the states when it intended them.

But the Medicaid model is a red herring here because the Exchanges have an entirely different federalism structure. They adopt the other main federalism model that Congress routinely employs—one that looks like the Clean Air Act, not like Medicaid. Under this model, Congress enacts a nationwide program, but offers the states the right of first refusal to implement a part of it. All of these types of programs share a defining structural feature: a federal fallback mechanism that requires the federal government to operate the program when the states decline to do so. Either way, the new federal regulatory scheme takes full, national effect, and that’s the point of the program.